Cross Country Healthcare Reports Second Quarter 2011 Results

BOCA RATON, Fla.--(BUSINESS WIRE)--
Cross Country Healthcare, Inc. (Nasdaq: CCRN) today reported revenue of
$126.0 million in the second quarter ended June 30, 2011, a 3% increase
sequentially from the first quarter of 2011 and a 7% increase from
revenue of $117.8 million in the prior year quarter. Net income in the
second quarter of 2011, which benefited from a lower than expected
effective income tax rate due to discrete items, was $1.6 million, or
$0.05 per diluted share, as compared to $1.2 million, or $0.04 per
diluted share, in the same quarter of the prior year. Cash flow from
operations for the second quarter of 2011 was $10.0 million.

For the six months ended June 30, 2011, the Company generated revenue of
$248.1 million and net income of $1.8 million, or $0.06 per diluted
share, which included the aforementioned discrete tax items. This
compares to revenue of $239.2 million and net income of $2.3 million, or
$0.07 per diluted share, in the first six months of the prior year. Cash
flow from operations for the first six months of 2011 was $11.4 million.

"Our second quarter results highlight the continued recovery in the
markets we serve as all four of our business segments produced revenue
growth from the prior quarter. The strongest momentum was generated in
our largest segment, nurse and allied staffing, of which the sequential
improvement was seasonally atypical for us. Currently, the number of
FTEs on contract in this segment is up more than 20% year-over-year,"
said Joseph A. Boshart, President and Chief Executive Officer of Cross
Country Healthcare, Inc. "Additionally, due in large part to the
broad-based resurgence in demand, the dynamics in our nurse and allied
staffing business are much better than they were for the last several
years. While our managed service provider (MSP) staffing service and
staffing for electronic medical record implementations continue to be
staples of our business, I am especially encouraged by the significant
increase in demand from other accounts that have largely been dormant
over the past few years. In fact, non-MSP clients currently account for
a substantial majority of our open nurse staffing job orders, which
provide our healthcare professionals with even more options to choose
from. Said another way, success today is driven much more by supply than
demand. And although we are in a supply constrained environment, this
greater diversity in job orders should enable us to further improve our
recruitment and retention of nurses," he added.

"The gross profit margin for the Company as a whole declined
110-basis-points from the prior year quarter due primarily to higher
housing costs in our nurse and allied staffing business along with the
shift in mix of our consolidated revenue toward this faster growing, but
lower margin segment. We expect that improving pricing trends in this
segment will provide some margin relief later this year," Mr. Boshart
said.

Nurse and Allied Staffing

For the second quarter of 2011, the nurse and allied staffing business
segment (travel and per diem nurse and allied health staffing) generated
revenue of $68.3 million, reflecting a 2% sequential increase from the
first quarter of 2011 and a 14% increase from the prior year quarter.
The sequential and year-over-year increases were due to higher staffing
volume. Contribution income (defined as income from operations before
depreciation, amortization and corporate expenses not specifically
identified to a reporting segment) was $5.6 million, a 12% increase
sequentially from the first quarter of 2011 due primarily to higher
revenue along with the normal seasonal reduction of payroll taxes.
Contribution income decreased 1% year-over-year due to higher housing
costs and higher SG&A expenses primarily associated with MSP-related
activity, which more than offset the benefit from greater staffing
volume.

Segment staffing volume increased 2% sequentially from the first quarter
of 2011, and increased 14% from the prior year quarter. Travel staffing
volume increased 2% on a sequential basis and increased 17% on a
year-over-year basis. Per diem staffing volume increased 3% sequentially
and 2% on a year-over-year basis. The average revenue per FTE per day
for the second quarter of 2011 was $305, a decrease of 1% sequentially
and a slight increase from the prior year. For travel nurse staffing,
the average hourly bill rate increased slightly on a sequential basis
and decreased slightly year-over-year.

For the first six months of 2011, segment revenue increased 9% to $135.1
million from $124.5 million in the same period a year ago, while
contribution income decreased 5% to $10.6 million from $11.2 million in
the prior year period.

Physician Staffing

For the second quarter of 2011, the physician staffing business segment
generated revenue of $30.6 million, a 4% increase sequentially from the
first quarter of 2011, but a 2% decrease from the prior year quarter.
The sequential increase was due to higher staffing volume and a
favorable shift in the mix of specialties. The year-over-year decrease
reflected lower staffing volume that was partially offset by a favorable
mix of higher bill-rate specialties. Contribution income was $2.9
million, a 5% increase sequentially due to higher revenue, but a 22%
decrease year-over-year due to lower revenue in the current quarter and
a favorable professional liability accrual adjustment in the prior year
quarter. Physician staffing days filled for the second quarter of 2011
was 21,737 days, a 5% increase sequentially, but a 5% decrease from the
prior year quarter. Revenue per day filled for the second quarter of
2011 was $1,408, a 1% decrease sequentially and a 4% increase
year-over-year due to a shift in mix.

For the first six months of 2011, segment revenue decreased 4% to $60.0
million from $62.4 million in the same period a year ago, while
contribution income decreased 14% to $5.7 million from $6.6 million in
the prior year period.

Clinical Trial Services

For the second quarter of 2011, the clinical trial services segment
generated revenue of $16.5 million, a 5% increase sequentially from the
first quarter of 2011 and a 4% increase from the prior year quarter. The
sequential and year-over-year improvement was due to higher staffing
volume that was partially offset by lower bill rates. Staffing accounted
for 95% of segment revenue. Contribution income was $1.6 million, a 20%
increase sequentially due to higher staffing volume and improved
operating leverage, but a 9% decrease year-over-year due primarily to
lower permanent placement revenue.

For the first six months of 2011, segment revenue increased 4% to $32.1
million from $31.0 million in the same period a year ago, while
contribution income decreased 13% to $2.8 million from $3.3 million in
the prior year period.

Other Human Capital Management Services

For the second quarter of 2011, the other human capital management
services business segment (education and training and retained search)
generated revenue of $10.7 million, a 6% increase sequentially from the
first quarter of 2011, but a 2% decrease from the prior year quarter.
Segment contribution income was $0.9 million, a 143% increase
sequentially and a 19% increase from the prior year quarter due to
significant revenue and operating improvement in the retained search
business offset by declines in the education and training business.

For the first six months of 2011, segment revenue decreased 2% to $20.8
million from $21.3 million in the same period a year ago, while
contribution income decreased 26% to $1.3 million from $1.8 million in
the prior year period.

Debt Outstanding and Credit Facility

During the second quarter of 2011, the Company reduced its debt by $1.9
million from the end of the prior quarter. At June 30, 2011, the Company
had $50.0 million of total debt on its balance sheet and a debt, net of
$16.0 million in cash and cash equivalents, to total capitalization
ratio of 11.3%. At the end of the second quarter of 2011, the Company's
debt leverage ratio (as defined in its credit agreement) was 2.17 to 1,
below the 2.50 to 1 maximum allowable ratio effective for the duration
of the credit agreement.

Guidance for Third Quarter 2011

The following statements are based on current management expectations.
Such statements are forward-looking and actual results may differ
materially. These statements do not include the potential impact of any
future mergers, acquisitions or other business combinations, any
impairment charges or valuation allowances, or significant legal
proceedings. For the third quarter of 2011, the Company expects:

Revenue to be in the $128.0 million to $130.0 million range.

Gross profit margin to be approximately 27.0%.

Adjusted EBITDA to be in the 4.5% to 5.0% range. Adjusted EBITDA, a
non-GAAP financial measure, is defined in the accompanying financial
statement tables.

Earnings per diluted share to be in the range of $0.03 to $0.05.

Quarterly Conference Call

The Company will hold its quarterly conference call on Thursday, August
4, 2011, at 10:00 a.m. Eastern Time to discuss its second quarter 2011
financial results. The call will be webcast live and can be accessed
online at www.crosscountryhealthcare.com
or by dialing 888-972-6408 in the U.S. or 210-234-0087 from non-U.S.
locations — Passcode: Cross Country. Replays of the call will be
available through August 18th online at the same website address or by
dialing 866-397-8265 in the U.S. or 203-369-0540 from non-U.S. locations
— Passcode: 2011.

This press release and accompanying financial statement tables reference
non-GAAP financial measures. Such non-GAAP financial measures are
provided as additional information and should not be considered
substitutes for, or superior to, financial measures calculated in
accordance with U.S. GAAP. Such non-GAAP financial measures are provided
for consistency and comparability to prior year results; furthermore,
management believes they are useful to investors when evaluating the
Company's performance as it excludes certain items that management
believes are not indicative of the Company's operating performance. Such
non-GAAP financial measures may differ materially from the non-GAAP
financial measures used by other companies. The financial statement
tables that accompany this press release include a reconciliation of
each non-GAAP financial measure to the most directly comparable U.S.
GAAP financial measure and a more detailed discussion of each financial
measure; as such, the financial statement tables should be read in
conjunction with the presentation of these non-GAAP financial measures.

About Cross Country Healthcare

Cross Country Healthcare, Inc. is a diversified leader in healthcare
staffing services offering a comprehensive suite of staffing and
outsourcing services to the healthcare market that include nurse and
allied staffing, physician staffing, clinical trial services and other
human capital management services. The Company believes it is one of the
top two providers of travel nurse and allied staffing services; one of
the top four providers of temporary physician staffing (locum tenens)
services; and a leading provider of clinical trial staffing services,
retained physician search services and educational seminars specifically
for the healthcare marketplace. On a company-wide basis, Cross Country
Healthcare has approximately 4,200 contracts with hospitals and
healthcare facilities, pharmaceutical and biotechnology customers, and
other healthcare organizations to provide its healthcare staffing and
outsourcing solutions. Copies of this and other news releases as well as
additional information about Cross Country Healthcare can be obtained
online at www.crosscountryhealthcare.com.
Shareholders and prospective investors can also register at this website
to automatically receive the Company's press releases, SEC filings and
other notices by e-mail.

In addition to historical information, this press release contains
statements relating to our future results (including certain projections
and business trends) that are "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and are subject to the "safe harbor" created by those
sections. Forward-looking statements consist of statements that are
predictive in nature, depend upon or refer to future events. Words such
as "expects", "anticipates", "intends", "plans", "believes",
"estimates", "suggests", "appears", "seeks", "will" and variations of
such words and similar expressions intended to identify forward-looking
statements. Forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause our actual results and
performance to be materially different from any future results or
performance expressed or implied by these forward-looking statements.
These factors include, without limitation, the following: our ability to
attract and retain qualified nurses, physicians and other healthcare
personnel, costs and availability of short-term housing for our travel
nurses and physicians, demand for the healthcare services we provide,
both nationally and in the regions in which we operate, the functioning
of our information systems, the effect of existing or future government
regulation and federal and state legislative and enforcement initiatives
on our business, our clients' ability to pay us for our services, our
ability to successfully implement our acquisition and development
strategies, the effect of liabilities and other claims asserted against
us, the effect of competition in the markets we serve, our ability to
successfully defend the Company, its subsidiaries, and its officers and
directors on the merits of any lawsuit or determine its potential
liability, if any, and other factors set forth in Item 1A. "Risk
Factors" in the Company's Annual Report on Form 10-K for the year ended
December 31, 2010, and our other Securities and Exchange Commission
filings made during 2011.

Although we believe that these statements are based upon reasonable
assumptions, we cannot guarantee future results and readers are
cautioned not to place undue reliance on these forward-looking
statements, which reflect management's opinions only as of the date of
this press release. There can be no assurance that (i) we have correctly
measured or identified all of the factors affecting our business or the
extent of these factors' likely impact, (ii) the available information
with respect to these factors on which such analysis is based is
complete or accurate, (iii) such analysis is correct or (iv) our
strategy, which is based in part on this analysis, will be successful.
The Company undertakes no obligation to update or revise forward-looking
statements. All references to "we," "us," "our," or "Cross Country" in
this press release mean Cross Country Healthcare, Inc., its subsidiaries
and affiliates.

Cross Country Healthcare, Inc.

Consolidated Statements of Operations (a)

(Unaudited, amounts in thousands, except per share data)

Three Months Ended

Six Months Ended

June 30,

June 30,

2011

2010

% Change

2011

2010

% Change

Revenue from services

$

126,042

$

117,837

7%

$

248,088

$

239,198

4%

Operating expenses:

Direct operating expenses

91,433

84,185

9%

180,503

171,913

5%

Selling, general and administrative expenses

29,475

27,322

8%

58,346

55,207

6%

Bad debt expense

(149

)

(211

)

(29%)

89

-

ND

Depreciation

1,804

2,221

(19%)

3,645

4,374

(17%)

Amortization

877

963

(9%)

1,842

1,924

(4%)

Total operating expenses

123,440

114,480

8%

244,425

233,418

5%

Income from operations

2,602

3,357

(22%)

3,663

5,780

(37%)

Other expenses (income):

Foreign exchange loss (gain)

6

(28

)

NM

23

15

53%

Interest expense

722

1,168

(38%)

1,450

2,267

(36%)

Other income, net

(78

)

(41

)

90%

(161

)

(84

)

92%

Income before income taxes

1,952

2,258

(14%)

2,351

3,582

(34%)

Income tax expense

379

1,080

(65%)

571

1,269

(55%)

Net income

$

1,573

$

1,178

34%

$

1,780

$

2,313

(23%)

Net income per common share:

Basic

$

0.05

$

0.04

25%

$

0.06

$

0.07

(14%)

Diluted

$

0.05

$

0.04

25%

$

0.06

$

0.07

(14%)

Weighted average common shares outstanding:

Basic

31,148

31,041

31,126

31,025

Diluted

31,218

31,220

31,204

31,187

Cross Country Healthcare, Inc.

Reconciliation of Non-GAAP Financial Measures

Adjusted EBITDA (b)

(Unaudited, amounts in thousands)

Three Months Ended

Six Months Ended

June 30,

June 30,

2011

2010

2011

2010

Income from operations

$

2,602

$

3,357

$

3,663

$

5,780

Depreciation

1,804

2,221

3,645

4,374

Amortization

877

963

1,842

1,924

Equity compensation

832

682

1,476

1,244

Adjusted EBITDA (b)

$

6,115

$

7,223

$

10,626

$

13,322

Adjusted EBITDA Margin (b)

4.9

%

6.1

%

4.3

%

5.6

%

Cross Country Healthcare, Inc.

Condensed Consolidated Balance Sheets (a)

(Unaudited, amounts in thousands)

June 30,

December 31,

2011

2010

Assets

Current assets:

Cash and cash equivalents

$

16,009

$

10,957

Short-term cash investments

1,940

1,870

Accounts receivable, net

69,702

64,395

Deferred tax assets

12,193

11,801

Income taxes receivable

1,165

6,563

Prepaid expenses

6,712

6,530

Other current assets

556

649

Total current assets

108,277

102,765

Property and equipment, net

13,388

14,536

Trademarks, net

52,101

52,055

Goodwill, net

143,563

143,349

Other identifiable intangible assets, net

22,880

24,681

Debt issuance costs, net

1,659

2,112

Non-current deferred tax assets

2,485

2,484

Other long-term assets

1,525

1,676

Total assets

$

345,878

$

343,658

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable and accrued expenses

$

10,552

$

7,944

Accrued employee compensation and benefits

15,566

14,641

Current portion of long-term debt

10,975

7,957

Other current liabilities

4,345

4,712

Total current liabilities

41,438

35,254

Long-term debt

38,988

45,556

Other long-term liabilities

16,176

16,839

Total liabilities

96,602

97,649

Commitments and contingencies

Stockholders' equity:

Common stock

3

3

Additional paid-in capital

244,151

243,005

Other comprehensive loss

(2,060

)

(2,401

)

Retained earnings

7,182

5,402

Total stockholders' equity

249,276

246,009

Total liabilities and stockholders' equity

$

345,878

$

343,658

Cross Country Healthcare, Inc.

Segment Data (c)

(Unaudited, amounts in thousands)

Three Months Ended

Six Months Ended

June 30,

June 30,

2011

% of Total

2010

% of Total

% Change

2011

% of Total

2010

% of Total

% Change

Revenue from services:

Nurse and allied staffing

$

68,271

54

%

$

59,817

51

%

14%

$

135,128

54

%

$

124,487

52

%

9%

Physician staffing

30,603

24

%

31,268

27

%

(2%)

60,039

24

%

62,410

26

%

(4%)

Clinical trial services

16,485

13

%

15,803

13

%

4%

32,117

13

%

30,974

13

%

4%

Other human capital management services

10,683

9

%

10,949

9

%

(2%)

20,804

9

%

21,327

9

%

(2%)

$

126,042

100

%

$

117,837

100

%

7%

$

248,088

100

%

$

239,198

100

%

4%

Contribution income (d)

Nurse and allied staffing (e)

$

5,633

$

5,709

(1%)

$

10,644

$

11,195

(5%)

Physician staffing

2,903

3,709

(22%)

5,665

6,591

(14%)

Clinical trial services

1,552

1,706

(9%)

2,844

3,284

(13%)

Other human capital management services

946

798

19%

1,336

1,816

(26%)

11,034

11,922

(7%)

20,489

22,886

(10%)

Unallocated corporate overhead (e)

5,751

5,381

7%

11,339

10,808

5%

Depreciation

1,804

2,221

(19%)

3,645

4,374

(17%)

Amortization

877

963

(9%)

1,842

1,924

(4%)

Income from operations

$

2,602

$

3,357

(22%)

$

3,663

$

5,780

(37%)

Cross Country Healthcare, Inc.

Other Financial Data

(Unaudited)

Three Months Ended

Six Months Ended

June 30,

June 30,

2011

2010

2011

2010

Net cash provided by operating activities (in thousands) (a)

$

10,003

$

13,400

$

11,376

$

23,674

Nurse and allied staffing statistical data:

FTEs (f)

2,461

2,163

2,433

2,266

Days worked (g)

223,951

196,833

440,373

410,146

Average nurse and allied staffing revenue per FTE per day (h)

$

305

$

304

$

307

$

304

Physician staffing statistical data (i):

Days filled (j)

21,737

22,989

42,405

46,155

Revenue per day filled (k)

$

1,408

$

1,360

$

1,416

$

1,352

(a) Certain prior year data has been reclassified to conform to the
current year's presentation.

(b) Adjusted EBITDA, a non-GAAP (Generally Accepted Accounting
Principles) financial measure, is defined as income from
operations before depreciation, amortization and non-cash equity
compensation. Adjusted EBITDA should not be considered a measure
of financial performance under GAAP. Management presents Adjusted
EBITDA because it believes that Adjusted EBITDA is a useful
supplement to income from operations as an indicator of operating
performance. Management uses Adjusted EBITDA as one performance
measure in its annual cash incentive program for certain members
of its management team. In addition, management monitors Adjusted
EBITDA for planning purposes, including compliance with its debt
covenants. Adjusted EBITDA, as defined, closely matches the
operating measure used in the Company's Debt Leverage Ratio and
Minimum Fixed Charge Coverage Ratio as defined by its Credit
Agreement. Management believes Adjusted EBITDA, as defined, is
useful to investors when evaluating the Company's performance as
it excludes certain items that management believes are not
indicative of the Company's operating performance. Adjusted EBITDA
Margin is calculated by dividing Adjusted EBITDA by the Company's
consolidated revenue.

(c) Segment data provided is in accordance with the Segment
Reporting Topic of the FASB ASC.

(d) Defined as income from operations before depreciation,
amortization and corporate expenses not specifically identified to a
reporting segment. Contribution income is a financial measure used
by management when assessing segment performance.

(e) Certain 2010 segment data has been reclassified to conform to
the 2011 presentation. During 2011, the Company refined its
methodology for allocating certain corporate overhead expenses to
its nurse and allied staffing segment to more accurately reflect
this segment's profitability.

(f) FTEs represent the average number of nurse and allied contract
staffing personnel on a full-time equivalent basis.

(g) Days worked is calculated by multiplying the FTEs by the number
of days during the respective period.

(h) Average revenue per FTE per day is calculated by dividing the
nurse and allied staffing revenue by the number of days worked in
the respective periods. Nurse and allied staffing revenue also
includes revenue from permanent placement of nurses.

(i) Beginning in the first quarter of 2011, the Company refined its
statistical methodology related to its physician staffing metrics.
Accordingly, historical 2010 quarterly data for these metrics have
been revised to conform to the current year's presentation.

(j) Days filled is calculated by dividing the total hours filled
during the period by 8 hours.

(k) Revenue per day filled is calculated by dividing the applicable
revenue generated by the Company's physician staffing segment by
days filled for the period presented.